The high cost of doing business in Nigeria, Africa’s most populous country, is compelling Mobile Network Operators (MNOs) to explore innovative cost reduction strategies – one of which is infrastructure sharing.
Analysts told BusinessDay, yesterday, that for quite some time, mobile operators have been bogged down by Nigeria’s harsh operational environment, intense pressure from the regulator to enhance Quality of Service (QoS) levels, as well as the growing need to further differentiate them as competition intensifies.
Determined to step up their game in the new business year, telecoms companies are placing infrastructure sharing as top priority for 2014.
MTN Group Limited said it has agreed to sell its tower portfolios in Rwanda and Zambia to IHS Holding Limited.
MTN will sell a total of 1,228 mobile network towers to IHS’s subsidiaries in Rwanda and Zambia, comprised of 524 and 704 towers respectively, for undisclosed amounts.
The sale of the towers is in line with MTN’s asset optimization strategy which is encompassed in MTN’s new strategic framework and builds on two previous deals with IHS in Cameroon and Côté d’Ivoire, for a total of 1,758 towers.
Sources told BusinessDay that MTN is also considering the sale of its towers in Nigeria in view of the spate of inordinate taxes and harsh operating environment. In 2011, Starcomms Plc, announced that it had successfully concluded a sale and leaseback agreement with Swap Telecomms and Technologies relating to 407 of its 557 Base Station for a consideration of N12.2 billion ($81.4 million) in cash.
Informed sources close to some of the networks told BusinessDay, weekend, that most mobile operators are looking to trim network operating expenditure, which is taking a huge toll on their profit margins, a move, analysts say, is headed in the right direction.
It was reported that, this year, telecommunications operators saved about N252.8 billion in Capital Expenditure (CAPEX), due to infrastructure sharing initiatives.
The funds would have been ploughed into building base stations.
Analysts, who spoke with BusinessDay, affirmed that the telcos are now determined to go down this route because infrastructure sharing allows for greater flexibility in terms of administration and implementation of services.
They argued that with falling Average Revenue Per User (ARPUs) due to heightened competition in Nigeria’s vibrant market, operating firms are seeking to derive significant savings on Capital Expenditure (CAPEX) and Operating Expenditure (OPEX) required for site build. This, the analysts maintained, would allow for more efficient utilisation of CAPEX to expand coverage and capacity.
Scarce capital and management attention, according to these analysts, can now be diverted to critical value-creating activities such as the opening up of Nigeria’s broadband internet market, which over the years, has
remained untapped, the industry analysts noted. Massive capital requirement involved in infrastructure roll out has made it quite difficult for telcos to operate profitably. As a result, expansion plans geared towards meeting growing subscriber demands are very difficult to execute, according to analysts.
Commenting on the deal, Sifiso Dabengwa, CEO of MTN Group, said, “In addition to unlocking value in our passive infrastructure, we remain cognisant of the need to contain and efficiently manage our cost structures across the Group as our markets mature and become more competitive”.
Dabenga pointed out that the telcos is confident that these transactions. It is a positive step towards freeing up management time to focus on new services, Dabenga said in a statement. Nigeria has over 116 million mobile subscriptions, according to the telecoms regulator, but the prevalence of poor QoS has blighted some of the successes recorded in the industry. Telecoms companies may begin active infrastructure sharing as one of the measures to tackle poor QoS. Speaking at the forum, Eugene Juwah, executive vice chairman, NCC, confirmed that part of the regulatory issues that needs to be addressed in order to harness the potentials of the nascent broadband industry is access to infrastructure by the existing and new players.
The EVC who was represented by the NCC’s Executive Commissioner, Stakeholders Engagement, Okechukwu Itanyi noted, “Current development in the industry has created a few vertically integrated players who have built infrastructures that are being leveraged on to compete in the provision of broadband services.” Funke Opeke, chief executive officer, MainOne, said at a recent industry forum, that operator’s apathy to infrastructure sharing
is limiting broadband penetration in Nigeria. Telcos have also complained at various fora about operational constraints with regard to getting approvals from local and state government authorities in the laying of transmission links.
By: Ben Uzor Jr
